How to Handle Salary Restructuring for PF Compliance Without Breaking the Bank?

I am working with a manufacturing company where they have 40 employees on the company payroll, but their salaries are in the range of 4500 to 6000. As per the PF Act, the minimum basic should be in accordance with the Minimum Wages Act, and these workers' current basic is 3000. If we restructure the salary, then all costs will increase.

Please suggest the best way to handle this situation.

Thanks and regards,
Sphurti
HR Executive

If you have not complied with the Minimum Wages Act, it will have a retrospective effect, i.e., you need to calculate it from the date of default and pay the employee accordingly. You also have to pay PF arrears with interest.

However, for a safer side, at least make their wages as per the Minimum Wages Act and start paying them. Accordingly, deduct the PF too. Retrospective cost implications will be very high.

Dear Sir,

We have paid PF up to March 2013 on the same basic of Rs. 3000/-. Now we don't want to increase the salary. Otherwise, please suggest if we put them on contract or voucher payments, then what will be the formalities to be completed.

Regards

If you have not complied with the Minimum Wages Act, it will have a retrospective effect. That is, you need to calculate it from the date of default and pay the employee accordingly. You also have to pay PF arrears with interest. However, for a safer side, at least make their wages as per the Minimum Wages Act and start paying them. Accordingly, deduct the PF too. The retrospective cost implication will be very high.

If you are paying a gross salary more than the minimum wages and you have fixed the basic salary less than the minimum wages, then there will be no issue. But there should be a uniform policy in your organization. Although the PF office is in the process of claiming the PF on minimum wages, they have not implemented it yet. So you may continue your practice unless the PF office implements paying the PF on minimum wages.

Regards,
Sanjeev Kwatra